The Goods and Services Tax has introduced a structured tax compliance system for all registered firms in India. Under this, composition taxpayers who have opted for the composition scheme file quarterly returns in a prescribed format called GSTR-4. This GSTR-4 return consists of two parts, Part 1 and Part 2, each capturing different details. In this article, we will analyze what is included in GSTR-4 Part 2.
Compliance Requirements For GSTR-4 Part 2:
The first key compliance requirement is furnishing invoice-wise purchase details from other composition dealers as well as exempt and non-GST suppliers. All invoices procured from such dealers have to be reported with specifics like the name and GSTIN of the supplier, taxable value, and place of supply. Any gaps in reporting purchase invoices can lead to the disallowance of the input tax credit claimed by the composition dealer on such invoices. Hence, the dealer must maintain a robust procurement register capturing all mandatory information to enable error-free reporting.
Another critical requirement is the timely reconciliation of advances paid or received from counter-party dealers. The composition taxpayer needs to report consolidated advance numbers showing gross advances received, amounts adjusted against invoices, and the final amount outstanding. Unreconciled advances can boost the chances of scrutiny as they may indicate the possibility of hidden transactions. Further, outstanding advances beyond a threshold can also hamper future procurement if left unresolved. Hence, dealers should adopt prudent accounting practices to ensure advances are diligently reconciled every tax period.
The composition scheme mandates that taxpayers cannot claim input tax credits on inward GST supplies. To enable analysis, Section 7 of GSTR-4 Part 2 will require HSN code-wise reporting of the taxable value of all goods and services procured in the return period. It demands that dealers capture invoices accurately as per the HSN codes defined by their suppliers. Any accounting mismatches arising from the wrong classification of codes can pose challenges. Thus, dealers need to invest in automated tools that will permit harmonized capture of purchase invoices with applicable HSN codes to avoid manual efforts.
Lastly, Section 8 requires the furnishing of all tax invoices, bills of supply, import or export documents, etc. issued during the tax period. It is to ensure compliance across outward supplies as well as cross-border transactions. Key details like document number, date, and associated taxable value have to be reported accurately without any revenue leakage. Thus, strong internal accounting controls have to be instituted to account for every document issued to customers or customs authorities. Any gaps can lead to scrutiny and financial penalties.
By addressing each of these requirements diligently through robust digital record-keeping and accounting standard operating procedures, composition dealers can reap benefits like seamless credit availed by recipient dealers as well as minimize compliance risks in GSTR-4 Part 2.
Detailed Breakdown Of GSTR-4 Part 2 Sections:
| Section Number | Details Required |
| Section 5 | Invoice-level details of supplies received from other composition taxpayers and exempt/non-GST suppliers |
| Section 6 | Consolidated information on advances received, adjusted or issued relating to supplies affected during the tax period |
| Section 7 | HSN/SAC-wise summary of inward supplies received during the tax period |
| Section 8 | Details of documents issued in respect of outward supplies inward supplies attracting reverse charge, and imports and exports during the tax period |
Invoice-level Details:
The first section under GSTR-4 Part 2 pertains to providing a detailed breakdown of all supplies of goods and services received by a composition dealer during the tax period. This section will require dealers to maintain tax invoices received from two categories of suppliers. One will be the other registered composition dealers, and the next will be the unregistered dealers or exempt suppliers.
For purchases made from other composition suppliers, taxpayers will need to report the GSTIN of the counterparty dealer along with specific invoice details like the date of issue, taxable value before taxes, and the signature of the authorized signatory who is verifying this information.
Similarly, for procurements from unregistered or exempt dealers, the taxpayer must capture the name of the supplier entity along with the place of supply details, the taxable value of goods or services supplied, and the signature of the authorized signatory. Thus, invoice-level granularity will ensure transparency for verification.
Reporting Of Advances Received And Adjusted:
Another section focuses on documentation around the inflows and outflows related to advances taken or paid by the composition dealer linked to transactions in that tax period.
A consolidated summary needs to be reported showing advance inflows like gross advance amounts received, advance outflows in terms of value adjusted against invoices issued under this tax period, as well as adjustments made against past advance balances. Finally, the dealer also needs to declare the net advance amount that remains outstanding after the above settlements.
HSN-wise Summary Of Inward Supplies:
While composition dealers are not eligible for input tax credits, GSTR-4 Part 2 mandates they analyze total inward supplies based on HSN codes. It requires classifying every supply invoice received under the relevant HSN code the counterparty supplier declared as part of their outward GST compliance. The total taxable value of inward supplies falling under each HSN code then needs to be summarized for reporting purposes. It will enable tax administrators to analyze procurement patterns.
Details Of Documents Issued:
The last section deals with the submission of information about different documents issued concerning outward supplies, those attracting reverse charges, imports, or exports. For each document, specifics like document number, date, and type (invoice, bill of supply, etc.), along with pertinent taxable value data, need to be reported. It will support the verification and reconciliation of transactions.
Thus, through detailed invoicing data, tracking of advances, and classifications of supplies, GSTR-4 Part 2 plugs vital information gaps for composition dealers and enables disciplined compliance.
Compliance Requirements For GSTR-4 Part 2:
Comprehensive Information Reporting:
One of the fundamental requirements is to ensure taxpayers report complete and accurate information in each section without any data gaps. Any taxable purchases or sales that take place but are not accounted for can have consequences. All supplies received, advances paid or received, breakup of procurement invoices using HSN classifications, and documents issued towards outward supplies need diligent reporting at an invoice or at least transaction level.
Reconciliation Of Advances:
The section on advances requires taxpayers to capture consolidated figures on gross advances received, adjusted against billings, and net outstanding amounts. However, taxpayers must undertake frequent monthly reconciliations of their advance ledgers through double-entry accounting practices. Any unresolved differences between payables and receivables can then be proactively resolved instead of carrying forward discrepancies. It will avoid deeper scrutiny of unreconciled amounts.
Appropriate Classification Of HSN Codes:
While summarizing taxable values under each HSN code declared by suppliers, composition dealers have to ensure they accurately classify invoices to align with counterparty filings to avoid accounting mismatches. Adopting automated workflows for capturing purchases with appropriate HSN codes can address potential manual errors.
Timely Online Filing:
A mandatory procedural requirement is for taxpayers to file their GSTR-4 Part 2 along with GSTR-4 Part 1 within due timelines. The last date for online filing is the 18th day of the month after the relevant quarter ends. Any delay in submission will attract financial fees, so taxpayers need to allot sufficient time for consolidating information across sections accurately and completing on-time filing.
Strategies For Accurate Documentation In GSTR-4:
- Maintain supplier-wise purchase registers
- Dedicated records of procurements from composition or exempt dealers
- Capture invoice-level details like taxable value, place of supply, etc.
- It helps streamline information gathering at the time of filing
- Monthly reconciliation of advances
- Use accounting tools to record advances and link to invoices
- Reconcile outstanding advances every month
- Minimizes unresolved gaps getting carried forward
- Automated HSN-wise inward supply reports
- Integrate accounting system with procurement process
- Invoices captured with relevant HSN codes upfront
- The system aggregates taxable values under each HSN code
- Accounting of Documents Issued
- Institute process for recording details around invoices and bills issued towards outward supplies
- Similarly, capture shipment or customs documentation for exports and imports
- Avoid any revenue leakages
Legal Considerations For GSTR-4 Part 2 Submissions:
Filing accurate and comprehensive details in GSTR-4 Part 2 is legally necessary for composition dealers for several reasons. Firstly, any instances of erroneous, incomplete, or wilfully manipulated reporting can attract consequences like financial penalties under relevant GST provisions. Tax authorities also have the power to initiate further investigations and enforcement action against dealers who have furnished false particulars.
Another consideration is that the entire information furnished under Part 2, including invoice-level granular purchase data, is subject to extensive audits and reconciliation by authorities to cross-verify its reliability. As it contains references to the GSTINs and taxable values of the supplying registered dealer, authorities can reach out to such composition suppliers to confirm the transaction. Hence, there is limited room for any data fudging or suppression of factual supplier invoice details if claimed input tax credits have to hold ground.
Lastly, composition dealers have to be careful concerning the analysis of advances paid or received. Even though the requirement is to submit consolidated amounts, tax officers can still initiate deeper scrutiny into the ledgers and records if there are major unexplained gaps between payables and receivables. Significant amounts that have been left unreconciled can raise suspensions and confrontations. Hence, dealers should attempt to resolve most outstanding advances through appropriate accounting documentation rather than just reporting the numbers.
Maximizing Benefits In GSTR-4 Part 2 Compliance:
While GSTR-4 Part 2 places greater responsibility on composition dealers owing to detailed data and documentary requirements, timely and disciplined compliance can reap important rewards.
Firstly, maintaining streamlined registers on procurements, especially tracking invoices from unregistered dealers, helps better organize supplier records. It allows dealers to identify non-compliant vendors who could be avoided to reduce risks. It also informs decisions for new acquisitions.
Another benefit is that sharing purchase invoice details with counterparty GSTINs allows recipient registered dealers who have business relationships to swiftly claim input tax credits on such invoices as the documentation accuracy is higher. Thus, the overall working capital cycle between dealers improves. Further, as books are typically reconciled in alignment with returns, the chances of revenue leakages get minimized over the long run.
The extensive reporting requirements also indirectly compel dealers to invest in process improvements, automation tools, accounting rigor, and internal audits to bolster compliance. The resultant higher maturity in maintaining transparency helps taxpayers be better prepared to substantiate their facts during any procedural assessments or audits if they arise. Thus, gradually, compliance effectiveness gets institutionalized across operations. So in the long run, composition dealers stand to gain from Part 2 compliance through higher credibility.
Conclusion:
While GSTR-4 Part 1 contains the aggregate summary of key transactions, Part 2 entails more granular aspects like invoice-level purchase details, advances reconciliation, and an HSN-wise summary of supplies received. Proper maintenance of purchase registers, accounting of advances, and classifying inward supplies with applicable HSN codes are vital for accurate reporting.
As GSTR-4 Part 2 subsumes various erstwhile indirect tax returns, a thorough understanding of the different sections is important for taxpayers to ensure compliance. Adopting the right strategies and accounting procedures can help taxpayers boost the benefits and limit risks in their GSTR-4 Part 2 filing.
Hi, if possible, please provide 5-10 FAQs related to the topic
Frequently Asked Questions:
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What details need to be furnished in GSTR-4 Part 2?
Details that need to be furnished include consolidated tax and invoice-level information on outward and inward supplies of both goods and services, tax payments, input tax credits claimed, interest, and refunds if any.
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What is Table 4A in GSTR-4 Part 2?
Table 4A captures consolidated details on the B2B outward invoice-wise supply of goods and services made during the year with applicable tax rates and amounts.
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Which tables need to be filled in GSTR-4 Part 2?
Key tables that need information include 4A, 4B, 4C, 4D, 4E, 4F, 4G, 4H, 4I, 4J, and 4K about supplies, taxes collected, taxes payable, adjustments, advances, and interest and refund details.
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Should exempt and nil-rated supplies be entered?
Yes, exempt and nil-rated supplies also need to be disclosed in Table 4C of GSTR-4 Part 2.
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Is table 4E for capturing advances?
Yes, Table 4E captures details of all types of advances—inward and outward—received and paid during the year, along with adjustments to earlier advances.
